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Original article
Survey Says: Tech Spending Is Up, But AI Rollouts Slower Than Expected - Battery Ventures
State-of-Enterprise-Tech-Spending-September-2024-1.pdf
Key takeaway
- For entrepreneurs: Despite AI hype, only 5.5% of identified AI use cases are currently in production, creating significant opportunities for startups offering implementation, security, and management solutions.
- For investors: While tech spending is increasing (74% planning budget increases), there's a notable gap between AI ambition and execution, suggesting investment opportunities in AI enablement and infrastructure tools.
Summary
Battery Ventures' September 2024 survey reveals a significant upward trend in enterprise tech spending, with AI driving much of the enthusiasm. However, there's a stark reality gap between AI adoption plans and actual implementation. The survey, covering 100 CXOs representing $35B+ in annual tech spend, shows enterprises are increasingly focusing on experimental initiatives and new technologies, while hiring freezes are declining and tech employment is stabilizing.
Budgets, AI Use Case Identification and Hiring Looking Up
- Budgets increasing: Budgets continue to trend upward with 74% of respondents planning to increase budgets vs. 55% in Q1’24. Fewer enterprises are staying flat, showing incremental budget increases and stabilization. Of those increasing, 59% cite Experimental Budgets – New Technologies as the driver, favoring adoption of new technologies over existing vendor growth.
- AI wave still coming: Generative AI deployments increased but are pacing behind the optimism respondents expressed in both Q3’24 and Q1’24. The vast majority of identified use cases still haven’t moved to production, with many not even under development. One reason seems to be a lack of in-house expertise: 2/3 of enterprises are seeking external assistance with implementations.
- Stabilised hiring downside: Despite the continued news about layoffs, our survey revealed some stabilization—especially welcome news for those companies selling SaaS with seat-based pricing. The number of organizations looking to slow down or enter a hiring freeze has dropped 19-pp from 46% in Q1 2023 to 27% in Q3 2024.
Insights
- 74% of respondents expect to increase tech budgets, up from 55% in Q1 2024. 59% of those increasing budgets are focusing on experimental initiatives and new technologies
- Generative AI deployments are increasing but at a slower pace than previously anticipated. Only 5.5% of identified AI use cases are currently in production but 89% expect to have generative AI in production within 12 months
- Large enterprises (>$1B in spend) are less focused on closed-source models through APIs compared to smaller organizations.
- Model observability and training are becoming higher priorities for enterprise buyers and vector databases and RAG (Retrieval Augmented Generation) are gaining importance.
- Customer service (71%) and employee productivity (70%) are the top focus areas for generative AI capabilities. 73% of organizations are using external resources to implement AI
Implications